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China's biggest indigenous carmaker Shanghai Automotive Industry Corporation is buying the vehicle making and parts businesses of its rival Nanjing Auto for $286 million in a move seen as a bid to create a national champion in the automotive sector in China.

The deal includes Nanjing's ownership of the UK's former MG brand, and it puts to an end the deal between Nanjing and Fiat.

Shanghai Automotive already has carmaking deals with General Motors and with Volkswagen and is thought to have been identified within China's highly politicised automotive industry as a potential national champion to fulfil burgeoning demand within China, as well as a group that could be the basis of a worldwide player.

Shanghai and Nanjing were earlier rivals for the remains of the MG Rover group in the UK. Both now make versions of former MG Rover cars, and Nanjing has set up a small assembly operation within the old Longbridge plant in the UK.

Shanghai now acquires this as part of the deal and is likely to see this as a potential bridgehead for a wider range of models in the European market.